Millions of home owners were given a welcome boost as a host of high street names, led by the nationalised banks, promised to reduce mortgage rates by 1.5 per cent after the Bank of England slashed the cost of borrowing this week.

Major lenders that have agreed to lower their standard variable rates include Northern Rock and Bradford & Bingley, now in public ownership after falling victim to the credit crunch.

Britain's biggest mortgage lender, Halifax, and Nationwide, the country's largest building society, have done likewise, along with the National Westminster Bank, the Royal Bank of Scotland and Scottish Widows.

All followed Lloyds TSB and Abbey, who announced plans to cut rates on Thursday, shortly after the Bank of England cut its base rate from 4.5 to three per cent – the lowest since 1955. Several other lenders, including Barclays and HSBC, were last night reviewing their options.

A Treasury insider told the Yorkshire Post it was "now clear what is expected of them" after banking chiefs were hauled before Chancellor Alistair Darling and urged to pass on the cut as soon as possible.

The capitulation of the banking sector over standard variable rates followed months of criticism from consumer groups and gave Prime Minister Gordon Brown another boost less than 24 hours after Labour won the Glenrothes byelection.

But the lenders' decisions were due as much to a fall in the key inter-bank lending rate, the three-month Libor, upon which variable mortgage rates are based.

The Libor fell by about one per cent to just under 4.5 per cent yesterday, leaving it 1.5 per cent above the base rate.

The announced cuts will provide some much-needed relief for hard-pressed home owners, reducing the monthly cost of a typical £150,000 mortgage by £138 to £887.

Borrowers heavily mortgaged with a £250,000 loan will see their repayments drop by £230 a month, or £2,757 a year.

Just under 10 per cent of Britain's 11.7 million mortgage customers are on a standard variable rate deal and home owners with tracker mortgages, which automatically track the base rate, will also benefit from the move.

Fixed-rate customers will not be affected, however, and any cut in interest rates is bad news for savers – half of all fixed-rate bonds were withdrawn within 24 hours of the Bank of England's announcement.

The swift response from most lenders was welcomed by Mr Brown, who was in Brussels yesterday to discuss the worldwide economic crisis with European Union leaders.

EU member states are to press for sweeping global financial reforms next week at a Washington summit for the G20 group of leading industrialised and emerging economies.

Mr Brown said: "(On Thursday), we saw decisive action on interest rates from the Bank of England and the European Central Bank, and I welcome the fact that a number of British banks have now decided to pass on the interest rate cut to customers, to families and to businesses."

Tory leader David Cameron had earlier called on the Government to compel Northern Rock and Bradford & Bingley to lower rates, but the lenders acted before being forced .

Banks that have yet to announce a cut appear likely to come under growing pressure over the next few days.

A former president of the National Association of Estate Agents, Melfyn Williams, said: "Those banks that do not pass on interest cuts are acting in direct defiance of the wishes of Government, industry and, most importantly, thousands of hardworking British homeowners.

"Those lenders involved in this damaging standoff should be ashamed of the lack of commitment that they have shown to helping house-hunters."

The Bank of England's decision to cut the base rate appeared to take the banking sector by surprise, prompting 33 lenders to withdraw their entire range of tracker mortgages for new customers.

But the banks' agreement to cut standard variable rates raises hope that tracker mortgage rates will also be significantly lower when they are reintroduced.

The chief executive of Nationwide, Graham Beale, with 1.4 million borrowers, said the society's decision to lower its standard variable rate would take effect from December 1.

"This is the right and fair course of action for Nationwide to take for all our borrowers at what is a very challenging time for everyone in the UK," he said.

"Our borrowers, who already benefit from one of the lowest standard variable rates on the high street, will see their rates fall dramatically and will be substantially better off.

"As a member-owned mutual organisation we are not driven by the need to maximise profit. Without shareholders, we are driven by the needs of our members."